Fitch Affirms SLM Student Loan EDC Repackaging Trust 2013-M1; Outlook Stable

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings affirms the senior notes at 'BBBsf' issued by SLM Student Loan EDC Repackaging Trust 2013-M1. The Rating Outlook is Stable.

KEY RATING DRIVERS

Ratings on the Underlying Trusts: Fitch currently rates the senior and subordinate notes issued from the underlying trusts 'AAAsf'/Outlook Stable and 'Asf'/Outlook Stable, respectively, except for one senior tranche in each of SLM 2006-8 and SLM 2008-9, and two senior tranches in SLM 2007-1 which are currently on Rating Watch Negative. Since excess cash can only be released from the underlying trusts after interest and principal payments are made to the senior and subordinate notes, Fitch does not expect the ratings on the class M notes to be higher than the ratings on the subordinate notes of the underlying trusts. However, the rating of the class M notes is not directly linked to the ratings of the underlying subordinate notes.

High Collateral Quality of the Underlying Trusts: The underlying trusts are collateralized by consolidation loans originated under the Federal Family Education Loan Program (FFELP), with guaranties provided by the U.S. Department of Education (ED) for at least 97% of principal and accrued interest. The current U.S. sovereign rating is 'AAA' with a Stable Outlook.

Stable Performance of the Underlying Trusts: The underlying trusts have been generating more than 100 basis points (bps) of annualized excess spreads since late 2009. The excess spreads came under pressure during the financial crisis due to basis risk spikes but remained in the positive territory. Prepayments have remained relatively low with the exception of two periods of heightened levels driven by one-off regulatory events.

Sufficient Credit Enhancement: While there is no hard credit enhancement for the class M notes, Fitch expects that the excess cash released from the underlying trusts will be sufficient to cover interest and principal payments of the class M notes under Fitch's 'BBBsf' stresses.

Adequate Liquidity Support: Liquidity support for the class M notes is provided by a reserve account, which was fully funded at closing and will be maintained at 6.3% of the outstanding balance of the class M notes, or $800,000, whichever is higher.

Acceptable Servicing Capabilities: Navient Solutions, Inc., as servicer, will be responsible for servicing the three underlying trusts. Fitch believes Navient Solutions, Inc. is an acceptable servicer of FFELP student loans.

RATING SENSITIVITIES

Fitch does not expect the ratings on the class M notes to be higher than the ratings on the subordinate notes of the underlying trusts. However, the rating of the class M notes is not directly linked to the ratings of the underlying subordinate notes, i.e. an upgrade to the underlying subordinate notes does not automatically lead to an upgrade to the class M notes.

Fitch conducts a sensitivity analysis for each deal by stressing prepayments and basis spread between 3ML and 1ML. Increases of 50% and 100% are applied to the base case prepayment rate (7.5%). Separately, increases of 7.5 bps and 15 bps are applied to the base case basis spread (1 bp).

Fitch's stress analysis is discussed in the presale titled 'SLM Student Loan EDC Repackaging Trust 2013-M1', dated April 11, 2013.

On Nov. 18, 2015, Fitch released its exposure draft that delineates revisions it plans to make to the 'Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria', dated June 23, 2014. Fitch has reviewed this transaction under both the existing and proposed criteria, which has resulted in affirming the notes at 'BBBsf' and the Outlook remaining Stable.

DUE DILIGENCE USAGE

No third party due diligence was provided or reviewed in relation to this rating action.

Fitch has affirmed the following rating:

SLM Student Loan EDC Repackaging Trust 2013-M1:

--Class M at 'BBBsf'; Outlook Stable.

Additional information is available at www.fitchratings.com.

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158

Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds (pub. 19 Dec 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=838868

Criteria for Servicing Continuity Risk in Structured Finance (pub. 17 Dec 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=875586

Exposure Draft: Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria (pub. 04 Dec 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=874971

Global Structured Finance Rating Criteria (pub. 06 Jul 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952

Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria (pub. 23 Jun 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=750530

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1004570

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1004570

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

View source version on businesswire.com: http://www.businesswire.com/news/home/20160516006618/en/

Fitch Ratings
Primary Analyst
Harry Kohl
Director
+1-212-908-0837
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson
Tracy Wan
Senior Director
+1-212-908-9171
or
Media Relations
Sandro Scenga, +1 212-908-0278
[email protected]

Source: Fitch Ratings

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